What is an Equity Transfer?
Simply put, a Transfer of Equity is when a person or people are added or removed from the property title held at the Land Registry.
The property title shows who owns the property, so usually a Transfer of Equity involves one owner remaining on the title, and either an additional person or people being added or an existing owner removed.
But what does “Equity” mean?
Equity is the term used to describe the value of a property after the value of any outstanding mortgage is subtracted from the current market value of the property.
For example, if your property is currently worth £150,000 but you have an outstanding mortgage value of £50,000, the Equity in the property is £100,000 (Property Market Value – Outstanding Mortgage Value = Equity).
Why would you carry out an Equity Transfer?
Transferring of equity is mostly e.g., when a couple marries and moves in together, or also if they divorce and one person decides to leave the home.
Transfer of the equity lets them change the names on house deeds, to reflect the property’s new ownership position. This can be considered as one person ‘buying out’ another’s share in a home, or ‘selling’ and splitting the shares they already have to allow another person to join them in ownership.
There are also other reasons why an Equity Transfer may be sought by a property owner. These include:
- Tax planning as part of a long-term financial planning strategy.
- Adding a spouse or civil partner to your property following your union.
- Removing a spouse or civil partner as part of separation proceedings.
- Simply adding your partner as part of your cohabitation.
- Gifting a share of the property to a child or relative without payment
So, what do we do when changing the property from a Sole Owner to Joint Owners?
When the property is going from Sole Owner to Joint Owners, this is the process we follow:
- Our solicitors conduct a review the title deeds or a copy of the property deeds from the Land Registry to prepare for the transfer.
- Prepare the draft transfer deed and this is then sent to the parties for checking.
- Any additional parties like mortgage lenders or secured lenders, banks or building society then need to be notified of the transfer. Any third party like this must give their written consent to the deed transfer.
- We then register the deed transfer at the Land Registry. A Land Registry fee is payable and the fee is dependent on the value of the property being transferred.
- Our solicitor also carries out identity checks of the clients as it is a legal requirement.
So, what do we do when removing a name from the title deeds?
Generally, the same basic legal process as mentioned above is followed. Even though a transfer of equity may be seen on the surface as a simple process people can forget that it is a legal one.
Legally a transfer of equity can be complex and you should always get legal advice.
What if I have a mortgage on the property?
If you are making an Equity Transfer and there is an outstanding mortgage on the property, you will usually be required to apply to your mortgage provider to approve the changes to the ownership.
Once this has been approved by your mortgage provider, the transfer documents can be produced for signature.
You will need to ensure that your mortgage provider is happy with either of the following situations depending on the type of transfer you are completing:
- You meet their lending criteria as a sole owner
- They are happy for the new owner to be included on the mortgage
Usually, the person transferring the interest will require a release from the mortgage conditions which can be done in one of the following ways:
- Being discharged from the existing mortgage using your own resources.
- Obtaining the relevant consent from your provider to transfer the property and make an application for a further advance where required for the “buy out” of the other party.
- Re-mortgage your property and borrow sufficient funds to discharge the existing mortgage and any surplus required for the “buy out”.
How MWQ Estate Planning Can Help You!
Please contact us at 0800 0903051 if you have any further questions.
Transfer of equity depends on your personal circumstances. Professional guidance from ourselves will always make your equity transfer run as smoothly as possible and get rid of any stress for all parties involved.
Our expert team can help you with all kinds of equity transfer, including:
- Whether the property has a mortgage or not
- If the property is leasehold
- When money is changing hands or if you want to gift shares in property
- Creating a trust for the property
- Creating wills for all involved
- Independent advice and help
Looking for a free, no-obligation consultation? Call us at 0800 0903051 today to get this schedule right away.
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